Correlation Between Dominos Pizza and Dennys Corp

Can any of the company-specific risk be diversified away by investing in both Dominos Pizza and Dennys Corp at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Dominos Pizza and Dennys Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dominos Pizza and Dennys Corp, you can compare the effects of market volatilities on Dominos Pizza and Dennys Corp and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Dominos Pizza with a short position of Dennys Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominos Pizza and Dennys Corp.

Diversification Opportunities for Dominos Pizza and Dennys Corp

-0.78

Correlation Coefficient

Dominos Pizza  Dennys Corp

Pay attention - limited upside

The 3 months correlation between Dominos and Dennys is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dominos Pizza and Dennys Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dennys Corp and Dominos Pizza is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Dominos Pizza are associated (or correlated) with Dennys Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dennys Corp has no effect on the direction of Dominos Pizza i.e., Dominos Pizza and Dennys Corp go up and down completely randomly.

Pair Corralation between Dominos Pizza and Dennys Corp

Considering the 90-day investment horizon Dominos Pizza is expected to generate 0.82 times more return on investment than Dennys Corp. However, Dominos Pizza is 1.22 times less risky than Dennys Corp. It trades about 0.06 of its potential returns per unit of risk. Dennys Corp is currently generating about -0.01 per unit of risk. If you would invest  32,765  in Dominos Pizza on February 3, 2024 and sell it today you would earn a total of  18,652  from holding Dominos Pizza or generate 56.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Dominos Pizza  vs.  Dennys Corp

Dominos Pizza

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dominos Pizza are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Dominos Pizza showed solid returns over the last few months and may actually be approaching a breakup point.

Dennys Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dennys Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Dominos Pizza and Dennys Corp

The main advantage of trading using opposite Dominos Pizza and Dennys Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dominos Pizza position performs unexpectedly, Dennys Corp can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dennys Corp will offset losses from the drop in Dennys Corp's long position.

The idea behind Dominos Pizza and Dennys Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.